Trans­for­ma­tional Build­outs

The fo­cus was on lay­ing the in­fra­struc­ture that could help de­liver next-gen­er­a­tion ser­vices in a fast ap­proach­ing dig­i­tal era

Voice&Data - - CONTENT -

#1. As­set Op­ti­miza­tion a Car­rier Pri­or­ity #2. Hor­i­zon­tal Dig­i­ti­za­tion in the En­ter­prise #3. Lo­cal Man­u­fac­tur­ing

Though the “dig­i­tal” agenda has been around for a few years now, the last fis­cal saw ac­tual deployments tak­ing place on a scale that looked mean­ing­fully sub­stan­tial. While the trend was more vis­i­ble in the car­rier segment, thanks to the pub­licly an­nounced large deals, the en­ter­prises were not left be­hind ei­ther.

Both car­ri­ers and en­ter­prises grew in­creas­ingly con­scious of the need to de­ploy and up­grade to next-gen­er­a­tion gears that would, in turn, en­able dig­i­ti­za­tion at a ser­vice level. How­ever, in the car­rier segment, where the stakes are much larger, there was some­thing big­ger at work. It wasn’t about one tech­nol­ogy or the other, but about how and why the tech­nolo­gies were be­ing de­ployed; it was about op­ti­miz­ing the ex­ist­ing as­sets. Given that spec­trum turns out to be the prici­est as­set, all strate­gic tech­nol­ogy de­ci­sions were in­creas­ingly taken with the ob­jec­tive of achiev­ing greater spec­tral ef­fi­cien­cies.

For en­ter­prises, with more and more IT mov­ing into the cloud, it be­came in­creas­ingly ev­i­dent that the en­ter­prise net­works had to be fu­ture-proofed for a cloud-driven era. This meant that the data cen­ters, whether third-party or cap­tive, were to be cloud-en­abled in some way or the other. How­ever, the tight IT bud­gets and high costs of hav­ing a cap­tive

pri­vate cloud make it un­eco­nom­i­cal to a large num­ber of en­ter­prises. This led to the de­vel­op­ment of pri­vate cloud, vir­tual pri­vate cloud and hy­brid cloud of­fer­ings by the third-party data cen­ter providers such as Net­magic, Sify, Nx­tGen and Tata Com­mu­ni­ca­tions with fa­cil­i­ties lo­cated in In­dia. Com­pli­ance is­sues are prompt­ing global data cen­ter ser­vice providers like Mi­crosoft, Ama­zon Web Ser­vices (AWS) and IBM to set up lo­cally hosted cloud fa­cil­i­ties. All of this is con­tribut­ing to the de­vel­op­ment of the net­work­ing in­fra­struc­ture mar­ket as well lo­cally.

An­other set of cat­a­lysts are com­ing from gov­ern­ment driven pro­grams like Smart Ci­ties and Make in In­dia, which are en­cour­ag­ing the de­vel­op­ment of a lo­cally vi­brant ecosystem, which in turn fur­ther strength­ens the net­work­ing in­fra­struc­ture as well as user-de­vice mar­kets.

Let’s take a deeper look at some of the key de­mand-side trends that helped shape the net­work­ing equip­ment and de­vice mar­kets dur­ing the fis­cal gone by:

#1. As­set Op­ti­miza­tion a Car­rier Pri­or­ity

Yes, while LTE net­work roll­outs hap­pened on a large enough scale, so did the 3G roll­outs. Car­ri­ers also looked be­yond, at tech­nolo­gies like Voice-over-LTE (VoLTE) and LTE Ad­vanced (LTE-A). While the costs as­so­ci­ated with these new net­works ap­pear to be in con­trast with as­set op­ti­miza­tion, from a strate­gic stand­point it’s not.

The at­trac­tion of LTE-A, for ex­am­ple, lies in the tech­nol­ogy’s po­ten­tial to har­ness seem­ingly frag­mented bands of spec­trum for im­proved ser­vice de­liv­ery, which in essence amounts to us­ing a tech­nol­ogy for op­ti­miza­tion of the spec­trum as­sets. And as noted above, spec­trum is the prici­est re­source that tel­cos hold.

With op­er­a­tors hav­ing spec­trum in di­verse bands such as 850 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz, and so on, they are faced with frag­men­ta­tion of spec­trum, which is lead­ing to un­der­uti­liza­tion of the pre­cious re­source. LTE-A helps ag­gre­gate two or more spec­trum bands into one and en­ables op­er­a­tors to of­fer down­load speeds up to 450 Mbps. The ad­van­tages of of­fer­ing such ul­tra­high-speed mo­bile broad­band, es­pe­cially for pre­mium cus­tomers, are ob­vi­ous for op­er­a­tors.

That said, op­er­a­tors are not jump­ing on to LTE-A all over. They are pick­ing up the tech­nol­ogy on the ba­sis of dif­fer­ent pa­ram­e­ters such as the cat­e­gory of the ser­vice area; amount of spec­trum avail­able there; the ex­ist­ing com­pet­i­tive land­scape in that ser­vice area, and so on. This has led to a mixed roll­out of 3G, 4G LTE and LTE-A.

Con­trary to ear­lier years, when Re­liance Jio had been the only op­er­a­tor com­mis­sion­ing large-scale LTE roll­outs, the fis­cal 2016 saw at least two more providers—Bharti Air­tel and Idea Cel­lu­lar—join­ing in a big way. Voda­fone’s 4G in­vest­ments had to be some­what lim­ited due to an in­suf­fi­ciency of spec­trum in the de­sired fre­quency bands.

This was duly re­flected in the per­for­mances of the key net­work in­fra­struc­ture play­ers like Eric­s­son, Nokia and Huawei, all of which bagged net­work roll­out deals of var­i­ous scales. The net­work in­fra­struc­ture in­dus­try rev­enues saw an ex­cep­tion­ally strong growth of around 50 per­cent, a per­for­mance that is likely to stay for the com­ing two years at the least.

The LTE deals very much rained through­out the year, though 3G roll­outs also con­tin­ued to hap­pen. How­ever, the most dis­tin­guish­ing as­pect this year was a strate­gic call by the ma­jor op­er­a­tors to go for an IP Mul­ti­me­dia Sub­sys­tem (IMS) ar­chi­tec­ture. While this was largely driven by an im­me­di­ate need to of­fer Voiceover-LTE (VoLTE) to the 4G sub­scriber, it also would pre­pare them bet­ter for in­ter­net of things (IoT) play in the not­too-dis­tant fu­ture.

An­other key high­light of the year was that the in­dus­try found a way to bet­ter tackle the Het­net en­vi­ron­ment it is sad­dled with, as dif­fer­ent gen­er­a­tions of net­works con­tinue to co­ex­ist. The ven­dors of­fered sin­gle-box ra­dio sup­port for 2G, 3G and 4G tech­nolo­gies.

For ex­am­ple, Eric­s­son bagged a deal from Idea Cel­lu­lar to de­ploy a 4G LTE net­work and to trans­form its ex­ist­ing 2G and 3G net­works. As part of the net­work in­fra­struc­ture, Eric­s­son is in­stalling its multi-stan­dard RBS 6000 ra­dio base sta­tions, which sup­port var­i­ous 2G, 3G and 4G LTE tech­nolo­gies in a sin­gle cab­i­net. For the roll­out of 4G LTE in the Delhi cir­cle for Air­tel too the RBS 6000 ra­dio base sta­tion formed a core part of the in­fra­struc­ture com­po­nent.

Fin­nish tele­com giant Nokia also gained trac­tion on the back of its sin­gle-RAN tech­nol­ogy. It bagged a three-year con­tract from Voda­fone to pro­vide LTE net­works in Mum­bai, Kolkata and Pun­jab. It also signed a deal with Air­tel to ex­pand its 4G part­ner­ship to five cir­cles for FDD-LTE tech­nolo­gies and two ad­di­tional cir­cles for TD-LTE tech­nolo­gies. Ad­di­tion­ally, it bagged the deal from Idea Cel­lu­lar to roll out 4G net­works in three cir­cles, namely Ker­ala, Andhra Pradesh and Haryana.

Among other no­table deals, Voda­fone awarded 4G roll­out deals for two cir­cles to Huawei Tech­nolo­gies, which also won a three-year con­tract from Te­lenor (Uni­nor) to mod­ern­ize and man­age its net­work across six cir­cles.

#2. Hor­i­zon­tal Dig­i­ti­za­tion in the En­ter­prise

First thing first: why the term, hor­i­zon­tal

The most dis­tin­guish­ing as­pect this year was a strate­gic call by the ma­jor op­er­a­tors to go for an IP Mul­ti­me­dia Sub­sys­tem (IMS) ar­chi­tec­ture.

dig­i­ti­za­tion? Well, pri­mar­ily be­cause when speak­ing in the con­text of net­work­ing equip­ment, there are two key ar­eas where dig­i­ti­za­tion is tak­ing the front seats. Both these ar­eas are hor­i­zon­tals, in that they cut across all ver­ti­cals. These are—the data cen­ter, and the gov­ern­ment.

The pri­mary driv­ers of dig­i­ti­za­tion are dif­fer­ent though, in both the hor­i­zon­tals. While in the data cen­ters, cloud-re­lated as­pects rule the roost, in the gov­ern­ment, the charge is cur­rently be­ing led by smart ci­ties, which is tan­ta­mount to in­ter­net of things (IoT) and ma­chine-to-ma­chine (M2M) net­works.

Among the most sig­nif­i­cant cloud data cen­ters to come up, or in the works, in­clude the ones from the global cloud plat­form and ser­vice providers, Mi­crosoft, Ama­zon Web Ser­vices and IBM. Mi­crosoft had three sites—in Pune, Chen­nai and Mum­bai—up and run­ning by Septem­ber 2015. Also, the third-party data cen­ter ser­vice providers are cloud­i­fy­ing parts of their as­sets in or­der to tap into the grow­ing hy­brid cloud op­por­tu­ni­ties.

The next-gen­er­a­tion switches, routers and other net­work­ing gears, in­clud­ing the more task-spe­cific ones like load bal­ancers, are be­ing de­ployed to match the ag­ile net­work­ing needs of these cloud data cen­ters in par­tic­u­lar, as also the other data cen­ters. Ven­dors are al­ready putting software de­fined net­work (SDN) fea­tures to good use for data cen­ter net­work­ing.

The gov­ern­ment’s 100 Smart Ci­ties pro­gram has emerged as an­other big area of op­por­tu­nity for the net­work­ing in­dus­try. The first list of 20 smart ci­ties was fi­nal­ized last fis­cal, fol­lowed by a fast­tracked list of 13 more ci­ties. A next list is al­ready in the works and once re­leased, it could take the to­tal tally of fi­nal­ized ci­ties up to 40.

A fun­da­men­tal build­ing block for the smart ci­ties would com­prise var­i­ous smart so­lu­tions, which could have ap­pli­ca­tions in ar­eas rang­ing from light­ing, sur­veil­lance and traf­fic man­age­ment to wa­ter man­age­ment and con­ser­va­tion. At the heart of en­abling these smart so­lu­tions, ideally, lies an in­tel­li­gent flow of in­for­ma­tion into an an­a­lyt­ics sys­tem, which makes the role of net­work­ing of paramount im­por­tance.

M2M con­nec­tions are ex­pected to be driven by ar­eas such as home se­cu­rity, build­ing au­to­ma­tion, health­care, and con­sumer elec­tron­ics; while the IoT segment driv­ers would in­clude wear­ables that are go­ing main­stream, apart from ap­pli­ca­tions such as smart me­ter­ing, smart build­ings, et al. All these deepen the need and scope for net­works that fos­ter seam­less con­nec­tiv­ity and in­for­ma­tion shar­ing.

On an av­er­age, an in­vest­ment of Rs 1,000 crore is ex­pected to go into the de­vel­op­ment of a smart city, of which Rs 500 crore would be funded by the cen­tral gov­ern­ment. While only a part of this spend would be on net­work­ing and re­lated in­fra­struc­ture com­po­nents, it still presents a siz­able growth op­por­tu­nity for the net­work­ing in­dus­try. More im­por­tantly, the de­vel­op­ment of smart ci­ties is ex­pected to pave the way for dig­i­ti­za­tion in sec­tors out­side of the gov­ern­ment.

#3. Lo­cal Man­u­fac­tur­ing

Again, the gov­ern­ment had a ma­jor role to play, with the Make in In­dia pro­gram act­ing as the big cat­a­lyst. The fis­cal 2016 saw a num­ber of lo­cal man­u­fac­tur­ing pro­jects that had been an­nounced in the pre­vi­ous year, be­com­ing ground re­al­i­ties.

While all the ma­jor mo­bile phone ven­dors are grow­ing the share of lo­cal man­u­fac­tur­ing for their mo­bile phone ship­ments in the In­dia mar­ket, the big­ger boosts have come in the form of mega an­nounce­ments from con­tract equip­ment man­u­fac­tur­ers like Fox­conn.

How­ever, it is ar­gued that hand­set man­u­fac­tur­ing in In­dia is still mostly about as­sem­bling the semi-knocked down (SDK) units at the fa­cil­i­ties set up lo­cally, and that full-scale man­u­fac­tur­ing is a far-away thing. A key rea­son cited is the lack of a com­po­nent man­u­fac­tur­ing ecosystem, which is per­va­sively vi­brant in China. This fac­tor be­comes all the more sig­nif­i­cant, con­sid­er­ing that the mo­bile phones mar­ket is highly com­pet­i­tive and ven­dors are un­der con­stant pres­sure to come out with new fea­tures and the turn­around times for new models are very short. In the ab­sence of a lo­cal com­po­nent man­u­fac­tur­ing ecosystem, the op­tions be­come so lim­ited that dif­fer­en­ti­a­tions be­come hard to achieve.

How­ever, there are also some key pos­i­tives that could work in fa­vor of lo­cal man­u­fac­tur­ing in In­dia. Per­haps most im­por­tantly, growth for com­po­nent mak­ers, just as for the smartphone mak­ers, is slow­ing in China while com­pe­ti­tion re­mains wafer-tight. As a re­course, the play­ers there are look­ing to tap into a growth mar­ket like China, where smartphone pen­e­tra­tion is yet to cross a thresh­old. La­bor costs in China are also ris­ing to lev­els where they start look­ing unattrac­tive to man­u­fac­tur­ers as well as investors. On the other hand, the in­cen­tives of­fered as part of Make in In­dia pro­gram could po­ten­tially make lo­cal man­u­fac­tur­ing propo­si­tions more at­trac­tive.

In what could be seen as a sig­nif­i­cant de­vel­op­ment, around 100 com­po­nent man­u­fac­tur­ing com­pa­nies, mostly from China, par­tic­i­pated in a Jan­uary 2016 sum­mit or­ga­nized in Delhi by the In­dian Cel­lu­lar As­so­ci­a­tion (ICA) and Mo­bile World (Shou­jibao) of China.

Fis­cal 2016 saw a num­ber of lo­cal man­u­fac­tur­ing pro­jects that had been an­nounced in the pre­vi­ous year, be­com­ing ground re­al­i­ties.

—Deepak Ku­mar The au­thor, Deepak Ku­mar is a mar­ket re­searcher and strate­gic busi­ness ad­vi­sor. He is the lead an­a­lyst for this In­dia tele­com mar­ket sur­vey V&D 100.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.